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December 03, 2008

On ITunes, Finance Apps for iPhones and iTouches

Some 13 million iPhone owners plus iPod touch users can now buy a slew of finance applications from Apple's (AAPL) App Store. There is a wide array of downloadable calculators and tools, helpful whether you work full-time in finance or need a little assistance keeping track of your personal budget. Many, including a mobile banking application for Bank of America (BAC) customers, are free. Others come at a price.

The $9.99 MathU RPN turns your iPhone into an advanced scientific calculator. MultiEducator's 99 cents Personal Formulator offers 30 functions, such as a credit-card minimum payment estimator and a tip calculator. Developer Marc Schulman describes it as financial dictionary-meets-advanced calculator. "It's the Swiss Army knife of applications," says Shulman, who has been creating applications for Apple since 1982. He also sells an advanced $5.99 version that performs 67 additional calculations, including cash-flow analysis—perfect, he says, for analysts and MBA students.

A Short Strategy That Falls Short

When a mutual fund borrows stock and sells the shares short, the proceeds of the short sale typically are invested in Treasury bills. The fund profits if the shares drop in price, and the T-bills provide additional yield. Last year saw a wave of new so-called 130/30 funds, which mimic a popular hedge fund strategy. Instead of putting the proceeds from their short sales into T-bills, the funds use the money to buy more stocks. Thus, for every $100 deposited by investors, a 130/30 fund owns $130 of stocks and shorts an additional $30 worth of stocks.

Marketed as a way to let managers profit from falling as well as rising stock prices, the strategy has been a flop. So far in 2008, 17 of 19 such funds have badly lagged the broader market, says Russel Kinnel, Morningstar's director of fund research (MORN). The RiverSource 130/30 U.S. Equity Fund, for example, is down 50%, seven percentage points worse than the S&P 500.

Kinnel predicts most of the 130/30 funds will close. "It's kind of hard to sell this 'hot new thing' and your expertise if you did worse than the market right off the bat," he says.

Pimco Bounds into Bond ETFs

Investors have been pouring money into equity exchange-traded funds (ETFs) for years, but the recent turmoil has prompted more interest in fixed-income offerings. Bond ETFs, which had been languishing, took in $2.5 billion from investors in September, up 74% from the same month a year prior, according to the Investment Company Institute. The increased attention has attracted the juggernaut of the bond world, Pimco. In a Nov. 14 filing with the Securities & Exchange Commission, the manager of the world's biggest bond mutual fund applied to open its first ETF.

Pimco's initial foray will seek to mirror the returns of the Merrill Lynch (MER) 1-3 Year U.S. Treasury Index, which tracks short-term government bonds. The filing didn't include the new ETF's stock symbol or expense ratio. (As of Dec. 2, Pimco had no additional information.) Competitor Barclays Global Investors (BCS) charges a 0.15% fee on its similar iShares Lehman 1-3 Year Treasury Bond Fund.

Pimco's ETF will target a popular part of the bond market. Year to date, short-term Treasuries have held up much better than their longer-term counterparts. The Barclays Capital index for bonds maturing in one to three years is up 3.3%, while those maturing in five to seven years are up just 0.7%.